Parker McCay's corporate attorneys, Kathleen O'Brien and Mariel Giletto go over four reasons to have a written contract with a freelancer.
Pete is the owner of a brand new business and is looking to begin advertising in your community and online. Congratulations! Pete meets with a graphic designer who will create logos, marks and brand concepts for a reasonable rate. Great! Pete never enters into a written contract to establish the terms of your arrangement with the graphic designer. Not good, Pete…Maybe. Even though the drafting and negotiation of a written agreement can be time-consuming and costly (especially on the limited budget of a new business), it is important to have a simple contract in place before working with any type of freelancer. Below are a few important reasons to have a written contract in place before hiring a freelancer.
1. Help Establish That Freelancer is an Independent Contractor
In order to avoid paying significant employment tax and other liabilities, it is important to establish a relationship with the freelancer as an independent contractor and not as an employee. The IRS will scrutinize the relationship to determine if the freelancer may be an employee, subject to employment taxes. The written contract helps to avoid a potentially costly conflict with the IRS.
2. Confirm Project Details, Timelines, and Deadlines in Writing
Putting the terms of the arrangement in writing allows both parties to understand the expectations required for the transaction. The agreement should include details of the required deliverables of the transaction (including the format), the due date of such deliverables, and payment and billing details.
3. Ensure Confidentiality and Protection of Proprietary Information
In working with a freelancer, confidential and sensitive information about marketing strategies, product launches or future plans will likely be shared between the company and the freelancer. A confidentiality provision can help ensure that a freelancer does not share any of this information with third parties. In addition, a freelancer may want to share the end product on her own website to promote her services. The parameters around these issues should be negotiated and included in any agreement.
4. Establish Who Owns the Copyright to an End Product
Under US copyright law, ownership remains with the creator of an original piece of work. If you intend otherwise, the transfer of such ownership must be clarified in a written agreement. The parties can agree to (1) a license for limited usage of the end product, (2) an exclusive license, (3) a complete assignment of the designer’s rights, (4) a work made for hire (under certain limited circumstances). Failure to negotiate ownership of a copyright could lead to a costly infringement battle with a freelancer.
This article provides a very brief summary of the reasons business owners should not cut corners when it comes to documenting agreements with an independent contractor or freelancer. If you would like additional information about how to protect your business through the use of effective agreements with independent contractors and freelancers, please contact the attorneys in Parker McCay’s corporate department at any time.
The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult a lawyer concerning your specific situation and any specific legal question you may have.